Compound Interest Calculator
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Master the Power of Compound Interest
Smart Investment Strategies
- Start early - even ₹1,000/month at 25 can create crores by retirement
- Reinvest all returns to maximize compounding effect
- Higher compounding frequency means better returns
- Consistency beats timing - regular investments win
- Consider tax-efficient instruments like PPF, ELSS for better post-tax returns
- Increase investments annually with salary hikes
- Don't withdraw early - let compounding work its magic
- Diversify across asset classes for optimal risk-adjusted returns
Understanding Compound Interest
Compound interest is "interest on interest" - your earnings generate their own earnings, creating exponential growth over time.
Compound Interest Formula:
A = P(1 + r/n)^(nt)
Where A = Amount, P = Principal, r = Rate, n = Compounding frequency, t = Time
The 8th Wonder: Einstein called compound interest the "eighth wonder of the world." Those who understand it, earn it; those who don't, pay it.
Rule of 72: Divide 72 by your return rate to know when your money doubles. At 12% returns, money doubles every 6 years!
Frequently Asked Questions
What's the difference between simple and compound interest?
Simple interest is calculated only on principal amount, while compound interest is calculated on principal plus accumulated interest. ₹1 lakh at 10% for 10 years: Simple = ₹2 lakhs, Compound = ₹2.59 lakhs.
How does compounding frequency affect returns?
More frequent compounding yields higher returns. ₹1 lakh at 12% for 5 years: Annual = ₹1.76L, Quarterly = ₹1.81L, Monthly = ₹1.82L, Daily = ₹1.82L.
What's better - lump sum or SIP?
Lump sum works better in rising markets, SIP reduces risk through rupee cost averaging. Ideally, invest lump sum when available and continue with SIP for disciplined investing.
How much should I save monthly for ₹1 crore?
At 12% annual returns: 20 years = ₹10,000/month, 15 years = ₹20,000/month, 10 years = ₹43,000/month. Start early to reduce monthly burden!
Should I consider inflation in calculations?
Yes! ₹1 crore today won't have the same value after 20 years. At 6% inflation, you'll need ₹3.2 crores for the same purchasing power. Always plan for real returns (returns - inflation).
What are tax implications on compound returns?
Equity: LTCG >₹1L taxed at 10%, STCG at 15%. Debt: Taxed as per slab. Use tax-efficient instruments like PPF (tax-free), ELSS (₹1.5L deduction), or NPS for better post-tax returns.
Complete Guide to Compound Interest & Wealth Creation
Everything you need to know about multiplying your wealth through compounding
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